I guess rising stock prices are good news, but one has to wonder at what is going on in China at the moment. I half expected (following my last post on this issue) a “bust” to appear in the title of this post but, despite more government warnings over the weekend, the markets are bubbling noisily away.

The FT reports that the Hong Kong market benefited from a government decision “to allow banking clients to access overseas stock markets for the first time” in order to take some pressure off the lcoal market.

“The move, which could trigger a massive inflow of investments into financial centres such as Hong Kong, has important economic implications because China is hoping to use increased overseas investment flows to slow the growth of its foreign exchange reserves, the world’s largest at $1,202bn.

The H shares, or Hong Kong listed shares in mainland companies, jumped 5.4 per cent in their best one-day gain since the end of last year. The stocks helped drive up the bourse’s benchmark Hang Seng index up 2.5 per cent to 20,979.24, the best one-day gain in nearly a year.”

Meanwhile the Bank of Communications (which recently had its status upgraded) listed in Shanghai – immediately gaining 79%. Not bad, even for a Chinese bank! According to the FT:

“As a result of the first-day jump, the company’s Shanghai-listed shares are now trading at a premium of around 70 per cent to its shares traded in Hong Kong, which also jumped 4 per cent in early trading. Although all the companies listed in both markets are trading at a premium in Shanghai, the average is around 45 per cent. “

The FT also reminded readers:

“Last week, Zhou Xiaochuan, chairman of the People’s Bank of China, said he was worried that a bubble might be developing in the stockmarket.”